With the launch of a newly refreshed website for PocketGamer.biz, I thought it would be a good time to reflect on the mobile games industry’s past, present, and future. The site celebrated its 15th anniversary last year, while Pocket Gamer Connects has been around for 10!
The mobile games sector has gone through arguably its first recession since the App Store boom that strapped a rocket to the sector and made it the most lucrative platform in the business (oddly arriving during the 2007 / 2008 financial crisis).
It also comes at a time when the entire industry is experiencing key challenges and widespread layoffs.
Below I’ve put together a (very) brief history of a few of the key trends and inflection points over the years (largely from a Western point of view).
For a history of the pre-App Store days, check out this series by Chris Wright that offers a retrospective on the mobile games industry from the 1990s and up to 2007/2008.
The App Store launch and mobile’s early years
Before smartphones and the App Store, mobile gaming was a completely different industry, and the 30% revenue share would have seemed like an incredible deal compared to those offered by mobile operators.
The first iPhone was announced in January 2007 and released in June that year. But it was the launch of the App Store in 2008 when the mobile games sector would start to lift off.
Over the coming years, premium games would rule the roost – with one of the most famous early titles being Angry Birds, launched in December 2009.
It became a global sensation and put developer Rovio on the map. Along with companies like Nokia and Digital Chocolate before it, it helped cement Finland as a global mobile hub that would eventually spawn other successful mobile studios, most notable Supercell.
The earlier days of mobile also marked a time when it was easier to get noticed on the App Store. There weren’t millions of apps to compete with or enormous user acquisition budgets. It was an accessible new platform with significant potential.
The free-to-play shift
While premium was the go-to that propelled companies like Rovio and others to success, free-to-play is ultimately what the industry is built on.
Over the years more and more companies would adopt the business model to massive success. There were early struggles of course. F2P in the West developed a poor reputation in the industry early on, fuelled by aggressive attempts at monetisation (remember Dungeon Keeper?).
But games like Supercell’s Hay Day and Clash of Clans (another Finnish studio!), Mixi’s Monster Strike, GungHo’s Puzzle & Dragons and Machine Zone’s Mobile Strike and Game of War cemented the business model as a highly lucrative space for mobile, that could reach millions of users thanks to the platform’s widespread adoption, while offering the most key elements of any games: fun.
Not everyone could make the shift successfully, however. While Rovio had dominated the early mobile era, it struggled to adapt to the F2P shift. When it eventually released Angry Birds 2 in July 2015, it subsequently spent a year rebuilding the game.
The changes worked though, and while it’s not the cultural phenomenon the first game was, it’s a healthy earner for Rovio. But the period between premium and F2P saw significant downsizing at the company.
Moving to mobile
Not just the shift to F2P – the move to mobile was also highly challenging for some companies. King (then known as King.com) went from a browser-based games company to launching Candy Crush Saga on mobile devices.
It must be pretty happy with that decision now. Billions of dollars later, that same game is still one of the most successful mobile titles in the world year in, year out.
Zynga, meanwhile, struggled with the shift to mobile. It made its name as a social games developer on Facebook with titles like FarmVille and Mafia Wars.
It was so successful, in fact, that it was able to get special rates from Facebook and eventually launched its IPO in 2011. Things quickly unravelled from there.
Facebook decided it didn’t care for games anymore – its future was in monetising through ads, and quickly burned its games business.
This also represents a warning about the current mobile market – Apple and Google don’t think of games as their core business, despite the billions it makes. Check out this Deconstructor of Fun article for what that could mean for mobile.
There is a long history of tech and social network firms investing heavily into games, only to pull the plug – Snapchat, ByteDance, Facebook again, for example.
Zynga’s business (and share price – which it never recovered before its sale to Take-Two) went into a tailspin. It took years – and a couple CEO changes (Xbox’s Don Mattrick? What?) – to stabilise and halt the incessant closures and layoffs.
For bold new start-ups, mobile F2P represented a fantastic opportunity. For larger businesses, it was not so easy. PC and console giants like Activision, EA and Take-Two would later spend billions getting into the mobile space, to mixed success.
Live Ops Landscape
The real power of going free-to-play is in a good live ops strategy. Candy Crush Saga remains the king of puzzle games (though Royal Match wants to dethrone it), not just because it’s a great match-3 title, but because it has been consistently updated with new levels, features and events over the years.
Look at any of the top grossing mobile games now and they’ll have a few things in common. Many of them will have launched years ago. Honor of Kings, Coin Master, Pokémon GO, Gardenscapes, Clash of Clans – they have all maintained their position at the top thanks to live ops.
It’s a topic that’s been addressed time and again at Pocket Gamer Connects over the past 10 years on our Live Ops Landscape track. You can check out some of those videos below.
Companies would continuously get better at it, perfecting events systems and anniversary celebrations, or releasing new characters through their gacha systems, to fuel revenue spikes.
Eventually, Epic and Fortnite would popularise the battle pass /season pass system (while also powering the cross-platform trend) that has been adopted across platforms and genres, not just in battle royale, to improve engagement, retention and monetisation.
Sensor Tower previously noted just how lucrative this was for games like Hay Day, which saw a surge in revenue years after its first release.
The ascendance of hypercasual
At the other end of the spectrum, hypercasual games started to dominate the charts in the mid-to-late 2010s.
Deconstructor of Fun calls them “the bubble gum of the games industry”. These aren’t your longstanding forever franchises, you play them a few times, the publisher makes money from serving you ads, and then everyone moves on.
It became a highly lucrative business for publishers like Ketchapp and Voodoo (and later others including SayGames, Kwalee, Homa, etc.). Publishers had moved from premium, to in-app purchases, to now having a model for ad monetisation to boot.
We published a three-part series on the ascendance of hypercasual here – check it out!
The lockdown boom
In 2020, the games industry experienced a surge in engagement and revenue. The pandemic sparked a wave of lockdowns across the globe, leaving people stuck indoors with little to do.
As a result, they turned to games, with mobile seeing an enormous surge. This ultimately wouldn’t last, and has been one of the catalysts for the state of the current industry – gaming and mobile are no longer fast-growth industries as they struggle to meet their pandemic highs.
Following a period of rapid growth, the sector is currently unwinding itself from some of those overambitious plans.
With revenue rising so high and mobile becoming such a vibrant industry with some of the world’s most loved and played games, Apple and Google decided to embrace gaming, make it a key pillar of their businesses, and have since done everything they can to support publishers and continue growing this great industry.
Just kidding.
In the name of privacy
In the wake of very valid concerns around privacy, following years of consumers handing over their data to tech companies and social networks for free products like Facebook, Apple decided to make its identifier for advertisers IDFA completely opt-in.
The problem, of course, is that the mobile games industry has built itself on effective user acquisition, ROAS and LTVs.
Live ops is great, but publishers need to find the right users that want to play their games for it to all work. It had effectively become a science to calculate success.
App tracking transparency effectively turns all of that off, making user acquisition much more challenging, to say the least. While fingerprinting continued, ATT has been a key factor in the mobile games sector’s subsequent decline after the lockdown boom.
Meanwhile, Apple has been able to build a multi-billion dollar ads business. Google has also followed suit with some of its own privacy rules, including privacy sandbox.
Mobile Dev Memo’s Eric Seufert has written about this at length. Check out ‘The App Tracking Transparency recession’ and ‘Apple robbed the mob’s bank’.
Also check out my analysis on how Apple, Google and Valve run their marketplaces and support discoverability. Two of them extract a 30% fee and charge for ads space to get users, and one of them doesn’t accept ads at all and specifically targets players most likely to spend.
So where are we now?
Over the last few years, Apple and Google have lived long enough to see themselves become the villains, to a certain degree.
They have become so dominant, the other large publishers have challenged their 30% fee stance and anti-steering measures, most notably Epic Games, which continues legal battles around the world.
The European Union has also taken them on with the Digital Markets Act, which is an attempt to open up large ecosystems like iOS and Android to third-party payments and alternative marketplaces.
This caused Apple to offer alternative business terms in the EU, which include a 17% revenue share and a core technology fee that charges for €0.50 per download over 1m installs.
But it’s all more complicated than that, check out the webinar below for details on how the DMA works and Apple’s terms.
The growth of web shops and alternative marketplaces (Xbox and Epic are set to launch their mobile game stores later this year, while Aptoide just launched its own on the App Store in the EU) could provide a safer haven for games publishers in future – and stores built for purpose.
But they face an incredibly high hurdle, particularly given Apple’s reticence to easily allow for competitors on iOS. And how many consumers will realistically go to other stores? Epic has found that enormously challenging on PC against Steam.
Mobile’s various challenges have led to some publishers halting new game releases, the death of hypercasual – and the rise of hybridcasual – and widespread layoffs (the latter also because of other factors like macroeconomic conditions).
It’s also one of the toughest times ever to be an indie or start a new games company in mobile. (Worth noting on that last point – FourthStar CEO Paul Gouge previously said he’s been told throughout his career it’s the hardest time to start a new studio).
Back to market growth?
But as Deconstructor of Fun’s Eric Kress said earlier this year at Think Gaming Istanbul: “It will get better. Just hang in there.”
According to Newzoo, mobile game revenue fell by 2.1% year-over-year to a still very lucrative $89.9 billion in 2023.
That followed the first ever decline in the sector in 2022 (following pandemic highs), with revenue falling by 6.7% Y/Y to $91.8bn. But comparing 2023 to 2022, the decline has slowed.
According to data.ai, meanwhile, mobile games will be back to growth this year, rising from $107.3bn to $112.1bn in 2024 (this includes App Store, Google Play and third-party Android revenue in China).
The chart also highlights another challenge facing games – the growth of non-gaming apps taking up more time and spend. These are just forecasts, of course, and we could easily be discussing an industry decline in a year’s time.
But there is hope of a return to growth for the year (though some in the industry have coined the term “survive to ’25”).
Publishers have always found ways to adapt. For some, that’s meant shifting to PC and away from mobile’s increasingly hostile market.
But there have still been some breakout hits over the last couple of years – including Scopely’s Monopoly GO! and Century Games’ Whiteout Survival (and maybe now Supercell’s Squad Busters?).
It’s an incredibly tough period for the mobile games industry. But there are signs of life.
There are of course myriad trends and moments I didn’t talk about or go in-depth on in this article – that would take a book (M&A, console publishers getting into mobile, the growth of non-gaming apps and platforms, cross-platform, IP, the influence of the Asia market, and many more).
If you want to keep up with these trends, keep checking PocketGamer.biz for the latest news and head to Pocket Gamer Connects for top industry insights into what makes this industry tick.
